ComStar : Reinventing the Channel

SDM2 Case Presentation

Dayalan Kishoreraj T Rakesh KS (1011020) (1011322) (1011196) Sathish Elango (1011130) Soumya Ranjan (1011287) Subash Mano (1011064)

Communications Equipment Industry

Decline in corporate spending in 2000-2002 due to Economic Downturn

Networking Equipment sales to grow by 9.5% in 2004

Technology change in the Industry (Box products to Enterprise solutions)

Rise in Competition

ComStar Product Portfolio

Vision : To become a fully integrated communications system provider

OnView 58% Market Share

Desktop Video Solution 60% Market Share

AudioPort 90% Market Share

Current channel system Problems/issues with channel Implications for future channel

Future Channel Map

Implementing the changes

28 engineers, VOIP

180 emp,35 channel partners, Network sys

COMSTAR Manufacturing Audio Port

Video conferencing Technology

25 emp R&D, Network access

Bryson

Harmony

Live View

Worldwide

Carry & forward

Tier 1: 15 distributors
Tier 2: 1400 small VARs

Around 300 Large VARs

Agents

End Customers

End Customers

Sales Team

Videowave
290 channel partners Strong service base+ 830 emp. + 75 direct sales force

COMSTAR Manufacturing Audio Port

Live View , Harmony, Worldwide, Bryson

Carry & forward

Tier 1: 15 distributors
Tier 2: 1400 small VARs

Around 300 Large VARs

Agents

End Customers

End Customers

Sales Team

Current channel system Problems/issues with channel Implications for future channel Future Channel Map Implementing the changes

Channel Rating

Changed purchase decisions- CIO

Complex Product

Technology change & Integrated Solutions

Changed Deal Size $- $$$

Comstar

Product change

Channel Rating

Back logs Customer Insulation

Artificial Cycle8:12:80

Large Inventory

Unpredictable linearity

Comstar

Distribution Channel Problems

Channel Rating

Poaching

Overhead

Discount Model

Compensation & incentive system

No Channel certification

Too Many distributors

Less direct selling

Comstar

Management Problems

Current channel system Problems/issues with channel Implications for future channel Future Channel Map Implementing the changes

Changing Product range and Customer profile

Implications on the future channel

Deliver Complex Products & Solutions

Channel System has to be changed

Hybrid Channel (Direct + indirect)

Conflict of interest between Direct & Indirect Channels

Current channel system Problems/issues with channel Implications for future channel Future Channel Map Implementing the changes

Box Products (SME)

Complex Products (SME)

Enterprise Solutions

Product Partitioning

Segment Partitioning

Future Channel Map

COMSTAR

Carry & Forward

Distributors

Large VARs

Direct Selling

Around 1400 small VARs

End Customers

End Customers

Enterprises Customers

Channel Evaluation
Criteria Parameters Old Channel Hybrid Channel Remarks

Efficiency

Capacity Cost Cost/Revenue - reduces Changing target Customer base Certification Ability to handle complex products Technology Change Further growth

Effectiveness

Coverage Control Competence

Adaptability Overall Rating Highest Rating

Flexibility Vitality

Current channel system Problems/issues with channel Implications for future channel

Future Channel Map

Implementing the changes

Reduce Channel Partners

Slowdown Shipments to reduce inventory

Increase Partner Certification

Channels to cover Small & Medium Enterprises

Set monthly sales target Rewards for complying with targets

Recruit Direct sales force

Train & Deploy Sales force

Sales team to cover Enterprise clients

Set sales targets

Rewards & Recognition

% Sales from Current System

9%

5%
Distributor + VARs Service Providers

86%

Other

Assumption: Reducing number of channels by 1/3rd = Reducing channel sale by 1/3rd Channel sale to be reduced from 86% to 60% Remaining 26% to be handled by Direct Sales Force

%Sales from Proposed System

9% 26% 60%

5%
Distributor + VARs Direct Sales Force Service Providers Other

Assumption: Increase in Direct sales by 30% = Increase in sales force by 30% Current sales force: 75 + x 30% increase in sales force: ~ 100 + 1.3x (minimum) Recruit 25-30 dedicated sales force *X current direct sales force from Comstar (plus 75 acquired from Videowave)

Time Frame for implementing new strategy

Strategy

Implementation Reduce Inventory

Time Frame 9 months

Remarks Channel inventory : maximum 2Q Gradual reduction: 3Q Industry Average CCNA course: 1 month MCSE course: 5-6 months 25-30 dedicated salesmen Similar to certification time frame Manage enterprise clients
12 months 9 months

Certification
Recruitment Training Deployment

6 months
3 months 6 months 3 months